Fed’s Quarles says Main Street lending program should be running in 2 or 3 weeks

The Federal Reserve Main Street lending program targeting mid-size businesses should be up and running in a few weeks, a senior central bank official said Friday.

Vice Chairman Randal Quarles, the Fed’s chief banking supervisor, said the facility should be available shortly as officials continue to work out operational details.

“We are putting together the mechanisms for that credit to be distributed through the banks,” Quarles said during a webinar hosted by the University of Utah. “That’s probably two to three weeks away.”

The Fed announced details of the program Thursday, with the expectations that it can provide up to $600 billion in loans for companies with up to 10,000 employees. The minimum loan size is $1 million and the term of the loans will be four years, with no prepayment penalty.

Since the coronavirus crisis began, the Fed has partnered with the Treasury on multiple liquidity programs, more recently expanding the moves to initiatives that directly target smaller and mid-size businesses.

Despite the likelihood of a severe economic downturn as the government has shut down much of the economy to control the coronavirus spread, Quarles joined forecasts from other Fed officials past and present in saying he thinks the U.S. will recover in fairly short order.

“Given the nature of this shock, there is every reason to believe that we come out on the other side of this with an economy that is essentially unharmed,” he said.

The Fed is working closely on the programs with a banking system that it had to bail out during the last crisis. 

While the said the system is “much stronger” than it was during the turmoil that exploded in 2008, Quarles said the Fed is going ahead with its bank stress testing later this year. He said the current conditions will be incorporated into those tests which normally use a series of extreme hypothetical conditions to determine the financial system’s health.